Why Municipal Tax Arrears of $20,000 Could Prevent Applications for or Transfers of Well Licences in Alberta

May 04, 2023

Written By Denise Bright, Keely Cameron, Kelsey Meyer, Ashley White and Kellen Rosenau

As discussed in our previous blog post, Unpaid Municipal Taxes Will Impact New AER Licenses and License Transfers, the Alberta Minister of Energy released Ministerial Order 043/2023 (the Order) on March 16, 2023. The Order requires the Alberta Energy Regulator (AER) to take reasonable steps to confirm that a well licence applicant, transferee or transferor does not have outstanding municipal tax arrears exceeding a specific threshold amount. The threshold amount had not been determined at the time of the initial Order.The Order required the AER to implement the direction "within a reasonable time" and to "have all necessary operating procedures and business systems in place no later than close of business April 30, 2023." 

The AER released Bulletin 2023-22 on April 27, 2023, indicating that the threshold amount is set at $20,000. Effective May 1, 2023, prior to granting a well licence application or approving the transfer of a well licence, the AER will require evidence that licensees with outstanding municipal tax arrears in excess of $20,000 have resolved those unpaid taxes.To facilitate the process, the Ministry of Municipal Affairs will provide the AER with a list of licensees who have municipal tax arrears outstanding in excess of $20,000.

If a well licence applicant or transferee is listed, satisfactory evidence must be provided to the AER proving that the outstanding tax arrears in excess of the $20,000 threshold have either been paid or an alternative repayment arrangement has been agreed to by the municipality or municipalities to which the arrears are owed. The AER's Bulletin 2023-22 states that satisfactory evidence in this context would be either a letter signed by the Chief Administrative Officer of the municipality or a valid tax certificate on the municipality's letterhead. Depending on how often the Ministry updates the list of tax arrears, even companies that have fully paid their taxes or made arrangements for their payment may have an additional administrative burden proving such payment or arrangement. 

Well transfers associated with the sale and purchase of assets will require additional evidence if the transferor is listed as having outstanding municipal tax arrears in excess of $20,000. Payment of the transferor's outstanding municipal taxes in excess of the threshold must be a condition of the purchase and sale agreement with the transferee; Bulletin 2023-22 indicates that an alternative repayment arrangement is not acceptable in such circumstances. The AER will now require such licence transfer applicant to submit, at the time of application, a letter signed by a director or an officer of the transferor company containing a verbatim citation of the conditional clause within the purchase and sale agreement.

These requirements pertain to new well licence applications pursuant to AER Directive 056, AER Directive 089 and AER Directive 090, as well as to well licence transfers pursuant to AER Directive 088. The authors' view is that these requirements only apply with respect to municipal tax arrears owed to municipalities in Alberta. It is an applicant's responsibility to compile and submit the mandatory evidence as part of the application process. Failure to provide this evidence will result in the closure of a new well licence application or a well transfer application.

If you have any questions in respect to the Order, or the requirements associated with well licence applications or transfers, please contact any of the authors.

Authors